Price Competition

In the context of a finite horizon model, we show that conformity based behavior creates new channels of dynamic interaction between firms, changing the nature of price competition. As time evolves, both price strategic complementarity and substitutability may arise along the equilibrium trajectory. This leads to V-shaped equilibrium price paths and oscillating trajectories of market shares. We provide also a new rational for the inversion of fashion trends.

It is commonly understood that residential real estate brokerage fees in the US tend to run 6% or 7% within local markets for existing property resales. Exceptions to these historically uniform going rates are starting to appear, and utilization of the internet will provide new efficiencies that should lead to lower commission rates in the future. One possible indication of where the long term commission rates may head, should price competition increase, is provided by a review of commission rates around the world. This study is a first attempt to gather such data and begin the process of global comparisons. Most industrialized country brokerage rates are significantly below those of the US, although there are clearly differences in the services provided, red tape, and liabilities, as well as information access. An exploratory model attempts to explain variations in fees around the world and deepen our understanding of possible equilibriums for US firms should price competition incr...

We develop a dynamic model of price competition in broker and dealer markets. With no payment for order flow, a zero-profit equilibrium exists. With payment for order flow, spreads widen to more than compensate for this payment; hence, there is no equilibrium in which market makers earn zero profits. While brokerage commissions for market orders can fall, the total transactions

This research use case studies as an approach to give evidence of the systemic relations and the existent trade-offs between the institutional, competitive, technological and organizational variables involved in the process of innovation in the food processing industry. The unity of analysis consists of dairy processors that recently launched new products in the fluid milk market. The results converged in showing the growing importance of non-price competitive strategies and the concomitantly need to adequate a public policy to generate variety in the technological and organizational forms in order to foster industry competitiveness.

Aim This quantitative study seeks to determine why the underground organ commerce exists and thrives in Colombia, and how it responds to global donor shortages, public opposition and government initiatives to curtail it. Policy lessons and insights from the Colombian experience in organ donation and transplantation are identified in this study. Subjects and Methods Statistical random samples of 169 living and paid Colombian donors (or vendors) were apportioned between the key organ supplier cities of Bogotá and Medellín based on population. A pre-tested and interviewer-administered questionnaire was designed for organ vendors in these multi-stage samples. Qualitative analysis of pertinent Colombian laws and regulations forms the other half of this study. Results Survey results from Bogotá and Medellín tend to indicate shared demographic characteristics between Colombian vendors and their counterparts in developing countries that are major destinations for organ trafficking. The organ trade in Colombia is generally open, brokered and without price competition and provisions for vendors’ postoperative care, which help attract many foreign buyers. These factors also increase the vulnerability of vendors to unscrupulous third parties. The study finds that public indifference, state/institutional incapacity, corruption, and constantly changing trade environments, rules and operations subvert the legal and regulatory framework for organ donation and transplantation, which in Colombia is rather unique for its extent of coverage, complexity and detail. Conclusion The empirical evidence obtained from Bogotá and Medellín offers a challenge for governments to look beyond the availability of legal and regulatory restraints and remedies. Why and how these can be effectively undermined by organ trade participants without necessarily affecting or reversing their economic behavior are pressing issues that demand immediate attention.

The increasing rate of the incidence of globalization of market, and the attendant intense competition amongst local business organizations in rapidly developing economies has taken a shift from price competition strategy (to avoid price war) to non-price competition strategy in terms of product/service differentiation and positioning to achieve the same objectives of preventing declining sales-turnover, profitability, and market-share and by

The U.S. dairy industry, many segments of which supported dairy policy changes in the 1996 Federal Agriculture Improvement and Reform Act, is much different than it was 20 or even 10 years ago. This report provides a historical overview of the industry, more detailed examinations of the fluid milk market and selected manufactured dairy product markets, a discussion of future prospects and trends in the industry, and some thoughts on the implications of those prospects and trends for dairy farmers and their organizations, processors, dairy product manufacturers, and retailers.

The deregulation of Ghana’s domestic cocoa supply chain that took place in the early 1990s was expected to bring competition among different private buyers and to generate a number of production incentives to the farmers. Most notably, it was expected that competition would emerge by means of price bonuses and/or premiums over the guaranteed price. However, this paper finds that

This paper provides necessary and sufficient conditions for the existence of a pure strategy Bertrand equilibrium in a model of price competition with fixed costs. It unveils an interesting and unexplored relationship between Bertrand competition and natural monopoly. That relationship points out that the non-subadditivity of the cost function at the output level corresponding to the oligopoly break-even price, denoted

This academic article aims to study the adaptation of business models and strategies by low-cost airline business in Thailand. By adopting hybrid strategies, low-cost airlines incorporate some service characteristics, product features and operations of full-service airlines into their attributes. This article also attempts to understand the factors influencing those changes which resulted from the challenges, obstacles, and concerns that the airline industry faces as a result of increasingly fierce competition, especially in terms of costs. It is widely known that price strategy is common among low-cost airlines due to its easy implementation and quick results. Nonetheless, many scholars have argued that such strategy does not contribute to sustainable competitive advantage and profitability. Consequently, low-cost airlines, both in Thailand and worldwide, must adapt in order to survive in a rapidly changing market. The final section of this article offers appropriate strategies that low-cost airlines should consider to lessen the impacts of those challenges and avoid price competition, in order to achieve true business sustainability.

Many countries are importing managed care and price competition from the US to improve the performance of their health care systems. However, relatively little is known about how power is organized and exercised in the US health care system to control costs, improve quality and achieve other objectives. To close this knowledge gap, we applied social exchange theory to examine the power relations between purchasers, managed care organizations, providers and patients in the US health care system at three interrelated levels: (1) exchanges between purchasers and managed care organizations (MCOs); (2) exchanges between MCOs and physicians; and (3) exchanges between physicians and patients. The theory and evidence indicated that imbalanced exchange, or dependence, at all levels prompts behavior to move the exchange toward power balance. Collective action is a common strategy at all levels for reducing dependence and therefore, increasing power in exchange relations. The theoretical and r...

This study utilizes a brand-level dataset that captures a unique natural experiment, a 100% increase in the excise tax, to evaluate different pricing models in the U.S. beer industry. To assess the plausibility of different models, the increase in marginal cost resulting from the tax increase is exploited: observed prices in the post-increase period are compared to the prices that should be observed under various pricing models. Three types of models are analyzed: Bertrand-Nash, leadership, and collusion. Results indicate that extreme cases of collusion can be confidently ruled out while several models may explain the observed prices equally well.

This paper studies the estimation of discrete games of incomplete information when the data may come from multiple equilibria. Most recent work has advocated two-step estimation methods which rely on the assumption that, even if the model has multiple equilibria, a single equilibrium is played in the data. We relax this assumption and study the identification and estimation of this class of models when we impose very weak conditions on the equilibrium selection mechanism. First, we discuss identifica- tion of structural parameters and the equilibrium selection mechanism under different conditions. Second, we propose an algorithm for the estimation of this class of models. An important issue associated the estimation of models with multiple equilibria is that one should maximize the likelihood not only with respect to the structural parame- ters but also with respect to the equilibrium types that generate the observations in the data. If no structure is imposed on equilibrium selecti...